Dow Shakeup Won’t Leave Big Trading Footprint

Today’s announced shake-up to the Dow Jones Industrial Average is the biggest change to the index in nearly a decade. But when it comes to investor dollars, it amounts to small fries compared to the comings and goings from the S&P 500.

But few mutual and exchange-traded funds actually follow the Dow industrials when compared to the S&P 500. Some $1.6 trillion in mutual and exchange-traded funds directly track the S&P 500, according to S&P Dow Jones Indices. That compares with just $30 billion that follows the Dow.

Put another way, the S&P 500 ties up about $50 for every $1 that chases the Dow.

So for the stocks themselves, any impact is likely to be small, analysts say. Bank of America is just 0.74 percent of the DJIA. Doing a little back-of-the-envelope math, BofA comprises about $222 million of all the money directly tracking the DJIA, which would be some 15 million shares. Meanwhile, on any given day, some 85 million shares of BofA change hands.

So it’s big — and certainly notable — but not that big from a trading-impact standpoint, especially considering that any index trackers have nine trading days to make the change. During that time, some 7.65 billion shares of BofA could be expected to change hands.

The contrast is striking in ETFs. The bulk of assets directly tied to the Dow are in the $11.4 billion SPDR Dow Jones Industrial Average ETF. It’s a big, widely traded fund, but is far smaller than the likes of the $136 billion SPDR S&P 500. Others like the iShares Core S&P 500 ETF holds $44 billion, and the Vanguard S&P 500 ETF holds $11 billion.